The Surf Coast and Bellarine towns where house prices rose most

House prices have soared on the Surf Coast and Bellarine Peninsula over the past five years, and some areas have risen by as much as two-thirds.

Experts say the pandemic acted as a catalyst for the boom in these coastal areas, as buyers shifted their lifestyle preferences.

Prices in many of those towns once rose even higher and have edged back over the past 12 months amid a broadly weak property market, higher taxes for secondary homes and higher interest rates.

Anglesea recorded the steepest five-year rise. Property prices there skyrocketed by 67.4 per cent to reach a median of $1,467,500, Domain data shows.

Barwon Heads followed with a 59.6 per cent increase, while Torquay and Point Lonsdale had gains of 50 per cent and 47.1 per cent respectively. All now have median house prices exceeding $1 million.

Domain head of research and economics Dr Nicola Powell describes the five-year increase as a once-in-a-generation boom, caused by lengthy pandemic lockdowns.

Torquay house prices have soared.Credit: Joe Armao

“The pandemic really was the impetus for change for many Australians … Buyers were flooding out of Melbourne. They were looking to the Surf Coast and coastal locations to find that dream property and lead a different and better work-life balance,” she says.

“That meant they were perhaps selling out of a much more expensive market, which gave them deeper pockets than local buyers.”

Not all areas experienced the same level of growth. St Leonards and Drysdale had more modest increases of 31 per cent and 25.2 per cent, respectively, due to factors such as their lower price points.

Powell expects growth rates to stabilise. “We saw an extreme rate of property price growth in many of these lifestyle locations in Victoria that was unusual in terms of the fierceness of the upswing … We know that property prices go through price cycles, and there’s always periods where we see them rise, and there are periods where we see the decline.”

However, she believes the Surf Coast and Bellarine Peninsula are poised to remain popular with buyers.

“There’s only a certain amount of coastal suburbs that either have a strong economy or job opportunities in close proximity to a capital city. They’re always going to be highly desirable for those reasons.”

Simon Bogdanov from Oslo Property in Torquay says the pandemic spike was fuelled by FOMO and an exodus out of Melbourne. Despite the market cooling in the past 12 months, he says Torquay is still appealing to buyers post-lockdown due to its expanding local economy and infrastructure.

“Over the last seven years there’s been a massive demographic shift of holiday to primary residents,” he says. “With that comes more and more businesses being set up locally, more jobs being available.

“Torquay is in close proximity to Geelong and Melbourne ... the infrastructure, in terms of medical, schools, cafes, restaurants, amenities, is far greater and more accessible.”

Bogdanov says entry-level properties in Torquay start at about $900,000 for apartments or townhouses, while high-end homes can fetch prices well into the millions.

In Barwon Heads, the median house price has reached $1,667,500, a sharp increase from pre-pandemic. Bellarine Property director Levi Turner says the market is now finding its feet amid challenges like rising land taxes.

He attributes the annual decline of 11.1 per cent to potential buyers “calculating five to 10 years [of] tax and working that into the offer that they present”.

“There’s a lot of buyers that could afford to buy a holiday house in Barwon Heads, but they’re thinking, ‘It’s going to cost me $100,000 a year to hold it. Why would I buy a holiday house?’”

Despite these challenges, Turner argues Barwon Heads remains sought after because of strict development limits and its charm.

“You just don’t have the growth in terms of size that the other suburbs do. It’s quite small,” he says. “Every coastal town has changed, but Barwon Heads still is a village. Only 4000 people live there full-time.”

According to Soulful Living Real Estate director Kellie Saddington, it’s a similar story in Anglesea. “You’ll have areas like Torquay that have experienced a lot of urban growth, and therefore their supply can continually increase. We can’t here in Anglesea,” she said.

Saddington says that in Anglesea, pandemic buyers were willing to purchase multimillion-dollar homes sight unseen. Today, entry-level homes in the area start at $990,000, with high-end properties reaching up to $5.5 million.

“The majority of the buyers that I’m seeing are in the age of 55-plus, and they are people that are still looking for a coastal home, but with work-life flexibility … They can downsize in Melbourne and upsize on the coast.”